Intraday Patterns in the Cross‐section of Stock Returns

ABSTRACT

Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross‐section
of stock returns. We find a striking pattern of return continuation at half‐hour intervals that are exact multiples of a trading
day, and this effect lasts for at least 40 trading days. Volume, order imbalance, volatility, and bid‐ask spreads exhibit
similar patterns, but do not explain the return patterns. We also show that short‐term return reversal is driven by temporary
liquidity imbalances lasting less than an hour and bid‐ask bounce. Timing trades can reduce execution costs by the equivalent
of the effective spread.